Wall Street snatches the "post-war trading theme"! Consumer stocks gathers strength as kings return, software stocks may stage a "counterattack moment"

Bank of America Corp strategist Michael Hartnett, who holds the title of "Wall Street's most accurate strategist", released a research report stating that one of the strategies currently with a high success rate is for investors to actively buy consumer stocks and software stocks that have been continuously sold off since the beginning of the year. This is to bet on the possibility of a "policy panic rescue package" that may occur as the Trump-led US government tries to avoid a recession in the US economy, as well as the rebound of software stocks under the backdrop of warming market risk preference and fundamental expansion driven by artificial intelligence technology. In a report sent to clients, this seasoned Wall Street strategist pointed out that once the Middle East political conflict involving GEO Group Inc is preliminarily resolved, US President Donald Trump is likely to push for stimulative policy measures related to consumer spending and broader economic growth to protect US consumers from potential economic downturn impacts under a higher inflation background, and to increase his already record low support among voters. The latest report released by Bank of America Corp shows that although the "bull bear indicator" has significantly fallen from the extreme optimistic range and the "BofA sell signal" triggered in December last year has ended, key reversal points whether it be a more thorough breadth deterioration, increasing cash positions, or clearer macro panic have not yet fully materialized. However, Hartnett's team of strategists at Bank of America Corp has started to consider "consumer stocks" as the most favored theme for reversal long positions under the current market risk preference fluctuations and continuous market volatility due to GEO Group Inc political factors. The core logic is not that the consumer fundamentals have completely bottomed out, but rather Hartnett predicts that the White House, following the easing of tensions in the Middle East conflict, will be forced to introduce consumer spending support policies under a higher energy inflation macro background, for reasons including recession risks, cost of living pressures, and midterm election considerations. In the latest report released by Bank of America Corp, Hartnett's team of strategists also includes software stocks, which have been pessimistically impacted by the narrative of "AI disrupting everything", as another most favored theme for reversal long positions, emphasizing that after experiencing a sharp decline in valuations, the software giants with long-term stable platforms are facing a rare "bottoming moment" or a textbook "buy on dips" entry moment. Bank of America Corp enthusiastically suggests that consumer stocks are one of the best trading and asset allocation themes post-war In the report, Hartnett's team of strategists wrote, "We assume there will be policy panic-assisted efforts to avoid falling into an economic recession." He said that Trump will carry out a "post-war policy shift to address affordability issues and a series of challenges brought about by declining support rates." He specifically mentioned potential stimulative fiscal policy measures related to universal basic income to protect American workers and consumers. The November midterm elections that will determine control of the US Congress are forcing Trump to address an increasingly dissatisfied public, especially regarding rising living costs and gasoline prices. This dissatisfaction is further exacerbated by the resurgence of energy inflation triggered by the Iran war. The latest surveys cited by BofA show that as housing, groceries, and utilities costs rise, squeezing people's wallets, voters in the MAGA camp are gradually shifting towards a negative attitude towards the US president's economic agenda. Hartnett emphasized in the report that US consumer stocks are one of his "most favored reversal long" trading themes, mainly due to market concerns about rising inflation and further economic growth slowdown or recession. This sector is currently near historical lows compared to the S&P 500 index, at levels similar to major market crises such as the COVID-19 pandemic and the global financial crisis. Meanwhile, SentimenTrader's latest research report suggests that now may be an excellent "buy on dips" opportunity for consumer stocks. The report shows that more than 50% of the stocks in the S&P 500 non-essential consumer goods index are trading at least 20% below their 252-day highs, and this situation has historically led to an average gain of about 14% in the following year; of the 28 times this has occurred, the index has continued to rise in 23 cases. Nationwide's chief market strategist Mark Hackett indicated that once uncertainty begins to alleviate, the consumer sector could be one of the first market segments to rebound. He said, "When investors become cautious or retreat to the sidelines waiting for the market bottom, this sector will suffer psychologically. If the headwinds we are facing are essentially resolved, this sector will be seen as a proxy for overall investor and consumer sentiment, and once things return to normalcy, it will perform quite well shortly thereafter." In addition, he also recommended going long on steepening the US treasury yield curve, a classic investment strategy that bets on the continuous widening of short-term and long-term interest rate differentials to profit in response to post-war monetary or fiscal policy reactions. The latest fund flow data emphasized by Bank of America Corp strategists shows that investor concerns about the stock market outlook are beginning to manifest. In the week ending March 25, outflows from US stock funds reached approximately $23.6 billion, the highest in 13 weeks, according to EPFR data; meanwhile, European stock funds recorded the largest outflows since April, reaching $3.1 billion. Is it finally a good time to buy software stocks that have been declining nonstop? Hartnett stated that software stocks that have experienced sharp declines since the beginning of the year are another "most favored theme for reversal long" according to Bank of America. The bank said that the software giants deeply integrated with cutting-edge AI technology, with fee logic more inclined towards consumption or process value, and with stronger customer stickiness, could benefit from a series of economic stimulus measures that may be undertaken by the Trump administration post-war, leading to stronger valuation recoveries compared to other sectors and other software targets. For software stocks, early-week flow data shows that after several weeks of deleveraging and selling off, hedge funds focusing on high leverage strategies seem to be showing signs of "marginal replenishment" they are replenishing both large-cap tech giants and software stocks that were previously damaged by the narrative of being impacted by AI. A recent research report released by another Wall Street bank, Jefferies Financial Group Inc., showed that giants like Microsoft Corporation, Snowflake, and Oracle Corporation, which gather data assets and integrate "AI+ core operational processes" deeply, and have solid fundamentals, are the preferred stock targets in the global enterprise software field. The report emphasized that they were unjustly killed by the pessimistic narrative of "AI disrupting everything" led by entities like Claude Cowork and OpenClaw. The cloud infrastructure, system access, identity and security, data pedestal, distribution channels, and operational processes strongly linked to daily employee work that are owned by software giants like Microsoft Corporation and Oracle Corporation are considered the most difficult-to-replicate operational processes by AI. As conveyed in the core viewpoint of Jefferies Financial Group Inc.'s report that enterprise AI budgets are prioritizing large cloud computing platforms and model layers this means that platform software giants' moats will be stronger under the assistance of AI agent-based workflow tools at the forefront of AI technology, and single-function SaaS providers will face significant pressure from the disruptive impact of leading-edge AI technology. In other words, as enterprises shift from experimenting with AI to formal deployment, budgets will flow primarily to platform software giants closest to core systems, core data assets, and core workflows, rather than prioritizing single-function SaaS providers. Compared to potential AI winners like Microsoft Corporation and Oracle Corporation, Jefferies Financial Group Inc. analysts emphasized in the report that software companies like Adobe and Docusig, which have products with easily digestible functionalities, weak moats, heavy customization, and a high likelihood of being completely revamped by modern AI technology, may face "destructive impacts" brought about by cutting-edge AI technology. Jake Seltz, Senior Portfolio Manager at Allspring Global Investments, said in an interview on Friday, "I believe Microsoft Corporation's stock has high long-term investment value. Its AI strategy will eventually be proven correct, and I believe it will largely be immune to the most severe fears of AI disruption. Meanwhile, these concerns are creating long-term holding opportunities, especially if you are willing to be a bit more patient."